US Dollar softens after mid-tier economic data

• Durable Goods Orders remained almost flat in August.
• US GDP grew at an annual rate of 3.0% in the second quarter of 2024.
• Initial Jobless Claims in the US fell to 218K in the week ending September 21.

The US Dollar Index (DXY), which measures the value of the USD against a basket of six currencies, is flat after a muted market reaction to a slew of robust US economic data. The DXY is trading at 100.88 at the time of writing.

Economic data this week showed evidence of resilience in the US economy. To add to that, the Fed has already stated that its response will depend on the interplay between these contrasting signals, balancing the need to address potential risks while ensuring the ongoing health of the economy.

Daily digest market movers: US Dollar sees losses after data points, Fed speakers

• New Orders for US manufactured durable goods remained virtually unchanged in August, rising by a marginal $0.1 billion to $289.7 billion, marking the sixth increase in the last seven months.
• Excluding transportation, New Orders increased by 0.5%, driven by a 1.9% rise in electrical equipment, appliances, and components. Excluding defense, new orders declined by 0.2%.
• Gross Domestic Product (GDP) in the US grew at an annual rate of 3.0% in the second quarter of 2024, in line with the initial estimate.
• Initial Jobless Claims in the US fell to 218K in the week ending September 21, below both the consensus estimate of 225K and the previous week's revised figure of 222K.
• The data supports the notion that the economy holds steady with no need of aggressive easing.
• In the meantime, Fed speakers are trying to push more dovish rhetoric.
• Atlanta Fed President Raphael Bostic highlighted that a 50-basis-point cut puts the central bank in a stronger position to handle economic uncertainties.
• Similarly, Minneapolis Fed President Neel Kashkari pointed out that a larger cut provides the Fed with more aggressive tools if inflation continues to ease.
• Chicago Fed President Austan Goolsbee echoed this sentiment, noting that a significant cut now gives the Fed greater room to adjust if economic conditions worsen.
• Fed Governor Michele Bowman dissented, favoring a more cautious 25-basis-point reduction, reflecting concerns about moving too aggressively.

DXY technical outlook: DXY momentum reverses with continued bearish dominance

Technical analysis of the DXY index reveals that the Relative Strength Index (RSI) and Moving Average Convergence Divergence (MACD) indicators suggest bearish momentum, with the RSI remaining in negative territory and the MACD printing flat green bars. This indicates weak buying pressure and suggests a continuation of bearish dominance.

Additionally, the strong resistance level at 101.00 limits the upside potential for the US Dollar. Key support levels include 100.50, 100.30 and 100.00, while resistance levels are located at 101.00, 101.30 and 101.60.